Our Loan Approval Process

There are four steps to obtaining a loan. The steps in the process include:

The first step in getting a loan is to gather an initial overview of your income, job history, credit history and income-to-debt ratio. Based on this review, you will receive a preapproval, counteroffer (possibly a different product and/or interest rate) or denial. With a preapproval or counteroffer, you will receive a list of supporting documents (loan conditions) that you must provide to verify the information you submitted. Based on the loan decision, a loan specialist will contact you to explain your options. This is no loan guarantee at this stage, but it helps you determine how much you can spend on a home and can help narrow your search.

The preapproval letter you will receive provides the seller with a measure of confidence in your ability to qualify for a loan. This is a definite advantage when the time comes for you to place a bid on a home.

After you have found a home or made a refinance decision, you will submit the property address to start the process for the appraisal, title report and other required inspections.

During this stage, a loan processor is collecting the supporting documents to verify the information you have provided. The processor will review the appraisal to verify the property value and the title report to ensure clear title to the property. All documents will be reviewed for final approval.

When the final approval is issued, your real estate agent and a loan specialist will work together to schedule a convenient closing time with you. At closing, you will receive and sign a Settlement Statement that discloses the detailed closing costs charged to you or paid on your behalf, the Mortgage or Deed of Trust, and other required documents.

After the documents are signed, the closing agent will have the Mortgage or Deed of Trust recorded with the county recorder and will issue a Title Insurance Policy.

The Loan Approval Process is generally based on the following criteria:

Income
To demonstrate your capability to repay the mortgage loan, the income you disclose for qualifying purposes will need to be documented. Typically, proper income documentation means providing your two most recent pay stubs and copies of your W 2s for the last two years. For self employed income, the last two years' tax returns and a year-to-date profit and loss statement are usually required.

Debt-to-income ratio
What you earn versus what you owe will determine how much you are able to borrow. This is known as the debt-to-income ratio, and conservative 36% debt-to-income ratio is used for prequalification. However, excellent credit patterns, job stability and substantial assets may allow for a higher debt-to-income ratio.

Job stability
You will be required to disclose two years of employment history. Employment at the same job or in the same line of work for two years is considered good job stability. Your employer will be asked to confirm your job status.

Assets
You will need to provide documentation to support the source of the down payment, closing costs and at least two months of PITI (principle, interest, taxes, insurance) in reserve. This usually requires providing two months of bank statements, your latest quarterly update from your 401(k) plans, documentation of your liquid assets (all checking, savings, stock, money market, 401(k) or IRA accounts, Certificates of Deposit and the cash value of insurance policies). If liquidation of an asset is required for down payment or closing costs, proof of liquidation and proof of value need to be documented.

Credit
A credit report is a detailed history of your payment patterns. Your credit score impacts your interest rate and down payment guidelines. Be prepared to explain any deficiencies noted on your credit report. Mistakes are common on credit reports, and you have the right to have any errors removed. If necessary, a Credit Repair Kit is available to guide you through the process of removing errors.

Poor credit history, including any judgments and bankruptcies, may not hinder you from achieving homeownership. Alternative Loan Programs are now available. These loan programs may have higher interest rates and/or fees and generally require a larger down payment.

On the other hand, an excellent credit history may allow you to provide less income documentation and make a smaller down payment.

Collateral
An Appraisal and Preliminary Title Report will be ordered on the property being used as collateral for your loan. The appraisal determines the fair market value of the property and must be done by an approved appraiser. Most loans range from 75% to 90% of the appraised value of the home. A loan up to 97% may be available to home buyers with excellent credit.

The Preliminary Title Report shows any liens, easements or encumbrances attached to the subject property. Any outstanding liens or judgments must be paid prior to closing to clear the title on the property.